PayPal Details Agentic Commerce Initiatives and Strategic Focus on Value-Added Services

To say agentic AI is having quite a week is an understatement. And the week is only half over. Several payment companies have hung major news announcements on this trend that is moving at an unprecedented speed even for artificial intelligence (AI). How fast? So fast that in the space it would take you to create an LLM prompt it has evolved from agentic AI to agentic commerce. PayPal used its agentic commerce announcement to lead off both its Q1 quarterly earnings call on Tuesday (April 29) and its Developer Days event at its headquarters in Silicon Valley.

“Thanks to rapid developments, the future is here,” PayPal CEO Alex Chriss told the earnings call audience on Tuesday (April 29). “Just a few weeks ago we launched the industry’s first remote Model Context Protocol (MCP) server and enabled the leading AI agent frameworks to seamlessly integrate with PayPal APIs. Now any business can create agentic experiences that allow customers to pay, track shipments, manage invoices and more, all powered by PayPal and all within an AI client.”

The Developer Days event assembles developers, engineers, and builders alongside leading AI firms like AWS, Anthropic, Google Cloud and Microsoft. Key developer tools released include the PayPal Agent Toolkit, designed to simplify integrations and allow developers to build agentic AI experiences for customers to manage their business within an AI agent.

Chriss said these tools overcome challenges like managing complex systems and numerous integrations, offering easy integration with PayPal’s APIs for building robust, adaptable and observable agentic workflows. This strategic pivot, according to the company’s executives, aims to empower developers and creators to design sophisticated, fast, efficient and secure commerce experiences. For merchants, agentic commerce represents a potentially multi-billion-dollar opportunity, allowing businesses of all sizes to capture new growth. PayPal emphasized its global network scale and data to help merchants reach new customers, while providing the crucial trust and security needed for consumers in agentic transactions.

Demonstrations at PayPal’s Developer Days showcased integrations with partners like Google Cloud for AI Shopping Companions using its Agent to Agent Protocol, AWS for building AI-powered storefronts with Merchant Assistant and Azure AI for creating personalized commerce experiences. PayPal’s agentic tools are part of a larger suite of capabilities within the PayPal Open platform, forming the foundation for agent-driven commerce ecosystems where multiple agents can interact with PayPal’s infrastructure to manage end-to-end shopping processes, from listing products and processing payments to managing inventory and handling disputes. Chriss sees this as charting the next era of commerce.

Value-Added Priorities

The agentic commerce announcement is part of a theme sounded early and often during the company’s earnings call: value-added services (VAS). PayPal is increasingly emphasizing its payment service provider (PSP) business and a suite of VAS as a critical element of its growth strategy, particularly targeting improvements in transaction margin dollars. This focus represents a strategic shift toward building deeper relationships with both large enterprise merchants and small businesses.

The company views the expansion of its VAS offerings as a significant opportunity, with Chriss describing it as a “massive untapped and margin rich opportunity.” Highlighting the impact of this strategic focus, he detailed a situation where expanding a relationship with a longtime merchant by focusing on price-to-value and integrating advanced risk capabilities and payment-ready APIs helped transform the merchant from unprofitable to profitable, significantly boosting its transaction margin by nearly 20 percentage points over a year.

PayPal expects these positive outcomes to continue, attributing them to the quality of their value-added services. The portfolio of value-added services includes offerings such as optimized debit routing, which helps merchants reduce transaction fees by routing eligible cards through lower-cost networks. Another service, Fraud Protection Advanced, leverages PayPal’s extensive fraud intelligence and machine learning to improve merchant risk decisions. Other VAS components span payouts, invoicing and point-of-sale solutions, as well as healthy performance in consumer and merchant credit. Revenue from “other value added services” demonstrated strong growth in the first quarter, increasing 17% to $775 million.

Executives stressed the importance and contribution of VAS to PayPal’s strategy and financial results when discussing the “unbranded” side of the business.

By the numbers, PayPal reported solid Q1 earnings. Total Payment Volume (TPV) grew 4% on a currency neutral basis to $417 billion, while total active accounts increased to 436 million and Monthly Active Accounts (MAAs) saw 2% year-over-year growth to 224 million. Transactions per active account (excluding PSP processing) increased by 4%. The “Branded Experiences” segment, encompassing online checkout, debit cards and tap-to-pay, demonstrated particular strength with TPV growing 8% ex accelerating from the prior year, driven by growth in PayPal debit card TPV (over 100%) and Pay with Venmo TPV (over 50%).